Chapter (5)

Exercises
16. LO.4 (Journal entries; cost accumulation) The following costs were incurred in February
2013 by Container Corp., which produces customized steel storage bins:

Direct material purchased on account $ 76,000

Direct material used for jobs:
Job #217 $44,800
Job #218 7,200
Other jobs 53,600 105,600
Direct labor costs for month:
Job #217 $10,400
Job #218 14,000
Other jobs 19,600 44,000
Actual overhead costs for February 220,000

The balance in Work in Process Inventory on February 1 was $16,800, which consisted of
$11,200 for Job #217 and $5,600 for Job #218. The February beginning balance in Direct
Material Inventory was $44,600. Actual overhead is applied to jobs at a rate of $4.95 per dollar
of direct labor cost. Job #217 was completed and transferred to Finished Goods Inventory during
February. Job #217 was delivered to the customer at the agreed-upon price of cost plus 35
percent.
a. Prepare journal entries to record the preceding information.
b. Determine the February ending balance in WIP Inventory. How much of this balance relates to
Job #218?

Solution:
16. a. Raw Material Inventory 76,000
Accounts Payable 76,000
WIP—Job #217 44,800
WIP—Job #218 7,200
WIP—other jobs 53,600
Direct Material Inventory 105,600

WIP—Job #217 10,400

WIP—Job #218 14,000
WIP—other jobs 19,600
Cash (or Wages Payable) 44,000
Manufacturing Overhead 220,000

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 Various accounts 220,000
WIP—Job #217 51,480
WIP—Job #218 69,300
WIP—other jobs 97,020
Manufacturing Overhead 217,800
(Actual rate per DL$ = $44,000 $4.95)

Finished Goods Inventory 117,880

WIP Inventory—Job #217 117,880
($11,200 + $44,800 + $10,400 + $51,480
= $117,880)

Cash 159,138
Sales 159,138
($117,880 × 1.35 = $159,138)

Cost of Goods Sold 117,880

Finished Goods Inventory 117,880

b. Ending WIP = Beg. WIP + Current costs – Cost of Job #217

completed
= $16,800 + $105,600 + $44,000 + $217,800 $117,880
= $266,320
Ending balance in Job #218 = $5,600 + $7,200 + $14,000 + $69,300
= $96,100

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